Beirut explosion creates boom in demand for glass, aluminium

Al Jazeera | August 31, 2020

The deadly explosion emanating from the port of Beirut on August 4 shattered all windows and glass doors within several kilometres of its vicinity.

For days after the explosion caused by the detonation of nearly 3,000 tonnes of unsecured ammonium nitrate, the crunch of broken glass could be heard on every street corner as millions of pieces were swept off the capital city’s littered streets.

The blast left the country’s economy – already struggling because of the breakdown of its banking system, skyrocketing inflation, and the COVID19 pandemic – in tatters.

But demand in one industry has been booming since the explosion – highly sought after glass and aluminium for reconstruction.

With tens of thousands of homes and businesses destroyed, the need for building materials – especially glass and aluminium – has gone through the roof.

But as the demand increased, so have prices, leaving many Beirut residents in open-air flats, unable to afford replacements for their broken windows and doors.

Skyrocketing demand

Because of a prolonged economic downturn and political instability in the country, the demand for building and construction materials was negligible before the blast.

But with the explosion affecting about 70 percent of Beirut buildings, according to experts, the need for glass and aluminium has been like never before.

“With the economic crisis hugely affecting the construction industry, our production was down to 25 percent over the past 18 months,” said Khalil al-Ghoul, a shareholder at a Lebanese company that imports and processes glass materials.

“But since the blast, production has gone up to 200 percent. Work is booming for everyone involved in the glass and aluminium industry,” said al-Ghoul. “It’s peak hour.”

According to Ismail Ahmed, owner of a small shop in Zuqaq al-Balat in Beirut, the number of orders for glass windows and doors has doubled after the massive explosion.

“I had seven or eight customers a week before the explosion, now it’s at least 15,” said Ahmed.

Despite the increase in demand, Ahmed said his profits did not. He explained while he has been selling his products for much higher prices, he was also forced to pay a lot more for them as costs increased exponentially, especially during the first week after the explosion.

“Before the blast, a square metre of transparent glass cost $10, while frosted glass was for around $14,” said Ahmed.

“Now prices are at $14 and $24 [respectively],” he said, explaining the added $4-$5 covered operational and transport costs, leaving him with only a marginal profit.

Reducing losses

According to Nada Ne’me, vice president of Consumers Lebanon, an organisation that works to protect against consumer exploitation, although small glass and aluminium retailers such as Ahmed’s are still making more profit than before the blast, wholesalers controlling the market were the biggest benefactors.

“Big merchants have certainly taken advantage of the situation,” said Ne’me.

“With many of them still selling glass and aluminium products that they’ve had in storage, their profit margins can be up 50 percent at times,” she added.

But according to Lebanese economist Patrick Mardini, increased demand for construction materials since the explosion has only modest returns for people in the industry.

“The blast will allow people working in glass and aluminium to partially offset the recession they were experiencing in recent years,” said Mardini, who heads the Lebanese Institute for Market Studies.

“They are only reducing their losses, not making large profits,” he explained, adding while the Lebanese economy has worsened since the August 4 incident, people working in the construction industry are at a slight advantage.

“The reason for the high prices is hyperinflation and the policy monetising debt,” said Mardini. “The real problem isn’t the merchants, it’s the government that is unwilling to reform and stop spending more than its income.”

Skyrocketing demand

Because of a prolonged economic downturn and political instability in the country, the demand for building and construction materials was negligible before the blast.

But with the explosion affecting about 70 percent of Beirut buildings, according to experts, the need for glass and aluminium has been like never before.

“With the economic crisis hugely affecting the construction industry, our production was down to 25 percent over the past 18 months,” said Khalil al-Ghoul, a shareholder at a Lebanese company that imports and processes glass materials.

“But since the blast, production has gone up to 200 percent. Work is booming for everyone involved in the glass and aluminium industry,” said al-Ghoul. “It’s peak hour.”

According to Ismail Ahmed, owner of a small shop in Zuqaq al-Balat in Beirut, the number of orders for glass windows and doors has doubled after the massive explosion.

“I had seven or eight customers a week before the explosion, now it’s at least 15,” said Ahmed.

Glass and aluminum trade booming after Beirut blast
For days after the blast, the crunch of broken glass could be heard at every corner of the city [Arwa Ibrahim/Al Jazeera]
Despite the increase in demand, Ahmed said his profits did not. He explained while he has been selling his products for much higher prices, he was also forced to pay a lot more for them as costs increased exponentially, especially during the first week after the explosion.

“Before the blast, a square metre of transparent glass cost $10, while frosted glass was for around $14,” said Ahmed.

“Now prices are at $14 and $24 [respectively],” he said, explaining the added $4-$5 covered operational and transport costs, leaving him with only a marginal profit.

Reducing losses

According to Nada Ne’me, vice president of Consumers Lebanon, an organisation that works to protect against consumer exploitation, although small glass and aluminium retailers such as Ahmed’s are still making more profit than before the blast, wholesalers controlling the market were the biggest benefactors.

“Big merchants have certainly taken advantage of the situation,” said Ne’me.

“With many of them still selling glass and aluminium products that they’ve had in storage, their profit margins can be up 50 percent at times,” she added.

But according to Lebanese economist Patrick Mardini, increased demand for construction materials since the explosion has only modest returns for people in the industry.

“The blast will allow people working in glass and aluminium to partially offset the recession they were experiencing in recent years,” said Mardini, who heads the Lebanese Institute for Market Studies.

“They are only reducing their losses, not making large profits,” he explained, adding while the Lebanese economy has worsened since the August 4 incident, people working in the construction industry are at a slight advantage.

“The reason for the high prices is hyperinflation and the policy monetising debt,” said Mardini. “The real problem isn’t the merchants, it’s the government that is unwilling to reform and stop spending more than its income.”

Economic crisis

Before the blast, Lebanon was already experiencing its worst economic crisis in decades. Thousands of people had become unemployed as businesses shut down and companies were forced to downsize.

For 20 years, the exchange rate of the Lebanese pound was pegged to the dollar at the rate of 1,500 Lebanese pounds to one US dollar. But since October last year, the value of the Lebanese pound plummeted to record lows, losing 80 percent of its value and reaching 9,000 to the dollar at one point.

With Lebanon depending heavily on borrowing to pay for imported goods – which constitute the majority of what the country consumes – the collapse of the currency meant imports were no longer affordable. Rising inflation also meant many households could no longer afford basic goods.

By fall of 2019, the central bank tried to stop the flow of money out of the country. It halted providing dollars to importers for anything other than wheat, fuel and medicine, and imposed limits on the amount of dollars people could withdraw from their accounts. It also proposed new taxes on petrol, tobacco and voice calls on apps such as WhatsApp.

The move stirred unrest pushing thousands of people onto the streets, as the depreciation of the pound severely affected disposable incomes and food prices shot up.

The central bank said after the explosion it would instruct banks and financial institutions to extend exceptional loans at zero interest to individuals and firms affected by it.

Meanwhile, the Lebanese government promised to subsidise the price of materials essential for rebuilding – including glass and aluminium – to help support people repair their homes.

But according to several observers and merchants, that has not been the case.

“The government never rolled out this decision. The price of glass and aluminium for consumers has either doubled or tripled,” said Ne’me.

Many people see it as the authorities’ responsibility to keep merchants in check and ensure consumers are not exploited.

But despite calls for a government cap on the price of construction materials after the blast, Mardini says the move would only create a bigger problem.

“If the price for construction material is set below their cost, these products will end up on a black market at much higher prices,” explained Mardini.

Several countries, including Egypt and Algeria, announced the donation of large amounts of glass and aluminium to support the rebuilding process.

It remains unclear, however, who received these donations, or if they arrived at all, according to several people in the industry.

‘Unaffordable’

Before the COVID19 pandemic even hit, the World Bank projected that 45 percent of Lebanese people would be living under the poverty line in 2020.

The increase in the price of glass and aluminium products has left thousands of people affected by the blast unable to replace their broken windows and doors.

Sitting on a ragged red sofa in the middle of their modest two-bedroom flat in the hard-hit neighbourhood of Mar Mikhael, Nicolas Nahhas, 78, and his wife Rita, 62, said they were waiting for a charity organisation to help them.

“Whether it’s the kitchen, the bedroom, or this living room, there’s not a single space that’s not windowless and without a door,” said Nicolas, as he pointed at every corner of his now airy and exposed flat.

“But I can’t afford to replace any of them,” he added.

Nicolas said while volunteers at an NGO took measurements for new windows and doors last week, he was still waiting for the installation.

“If the weather gets cold, we’re doomed,” said his wife Rita.

Just across the road from the old couple’s flat, a group of young volunteers were working hard to repair several homes in the disadvantaged area.

“The most obvious need is glass and aluminium,” said Elio Yacoub, a 25-year-old volunteer, explaining that “every single home needs new windows and doors.”

The volunteers, some of whom are architects and construction engineers, said they depended on the receipt of donated windows and doors to fix what they can in the area.

“But there’s only so much we can do,” said Yacoub. “The need is much higher than what we’re supplied.”

While many merchants in the glass and aluminium industry say they are still selling mostly stored glass and aluminium products, they will eventually be forced to import new material to supply the demand since the blast. But they may not be able to afford that.

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